Another Look at what to do with Time-series Cross-section Data

Our study revisits Beck and Katz' (1995) comparison of the Parks and PCSE estimators using time-series, cross-sectional data (TSCS). Our innovation is that we construct simulated statistical environments that are designed to approximate actual TSCS data. We pattern our statistical environments after income and tax data on U.S. states from 1960-1999. While PCSE generally does a better job than Parks in estimating standard errors/confidence intervals, it too can be unreliable, sometimes producing standard errors/confidence intervals that are substantially off the mark. Further, we find that the benefits of PCSE can come at a large cost in estimator efficiency.